Limited partner investors (LPs) – institutions, foundations, pensions and endowments – expect to increase their allocations to alternative assets over the next year, according to a recent report.

One in three (31%) LPs surveyed expect that they will increase their target allocation to alternative assets in the next 12 months, while three in five (59%) expect allocations to remain the same, finds the semi-annual Global Private Capital Barometer report, which surveyed the views of 110 private capital investors from around the world that oversee a combined US$2.1 trillion in assets under management.

Investors, the report adds, are most likely to increase their target allocation to private credit (45% of investors), with one third expecting to increase their allocations to infrastructure (33%) and private equity (31%).

In a signal of investors’ desire for further diversification and liquidity, 38% of those surveyed say that they expect to increase their allocation to private markets secondaries. The appetite for secondaries, the report shares, is particularly strong among Asia-Pacific LPs, with 67% of them planning to increase their allocations to the asset class, higher than their peers in Europe (34%) and North America (29%).

The expected increase in allocation to alternative assets reflects investor optimism about distribution levels, notably in private equity, with 86% of investors saying that they expect to receive an increase in distributions from private equity (PE) managers in 2024 compared with 2023. In particular, 95% of investors in Asia-Pacific anticipate greater distributions, compared with 91% and 77% for those in North America and Europe respectively. 

The report’s findings build on a strong track record for the PE asset class as a whole in recent years; with 62% of investors saying that their PE portfolio has generated annual net returns of 11% to 15% since they began investing. More than one in four (26%) say that their PE portfolios have delivered annual net returns of 16% to 20%. 

“These findings are a huge vote of confidence for alternative assets,” says Jeremy Coller, chief investment officer and managing partner of Coller Capital. “LPs stand ready to not just maintain their allocations but to actively increase them as they seek attractive, long-term risk adjusted returns. Nowhere is that clearer than in private market secondaries, where LPs have seen the diversification and liquidity on offer. Many expect to increase their allocation here.”